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Blog

Common Tax Deductions for Small Businesses

ADMIN

August 19, 2021

As a small business owner in Indiana, you would gladly accept any and all tax deductions available to you and your company. Good small business tax planning and preparation involves educating yourself on all the different small business tax deductions you might qualify for. Every penny saved can be invested back into your business to improve your bottom line ever year.  

Continue below to learn the most common small business tax deductions you should be taking advantage of, and where to find trusted business tax advisor in Indianapolis.

Finding Tax Deductions for Small Business Owners

If you want to avoid missing out on any small business tax deductions you qualify for, you will need to incorporate a comprehensive system of detailed record keeping, expense itemization, and a lot of arithmetic. As a small business owner, you should not feel pressured into being an expert accountant.

Instead, it is strongly encouraged to consult with a seasoned business accounting firm that specializes in small business tax planning, preparation, booking keeping, and more. They can manage all of these number-crunching and data collection systems for you, so that you may focus on your business’s services or specialty.

However, it is wise to gain a little knowledge on the various small business tax deductions before your consultation, which can help you develop a list of questions and topics you wish to discuss with your business accountant.

Common Tax Deductions for Small Businesses:

Although the guidelines and regulations for each type of small business may vary, the small businesses that may qualify for these tax deductions include sole proprietorships, C-corps, S-corps, partnerships, and LLCs.

Startup Expenses

Although not technically a tax deduction per say, startup expenses for a small business are deemed capital expenses by the IRS because they are an investment. So, you can deduction your startup costs gradually over the course of several years. This is known as amortization, which is beneficial to small business owners because it helps analyze and manage profitability.

Property Rent

If you lease or rent the property that you do business out of, you can deduct the property rent from your taxes. This may also apply to small businesses that are operated out of residential setting.

Insurance

If you own a small business, you likely have more than one kind of insurance policy. From business owners’ policies and business continuation coverage to liability coverage, individual health insurance and more, 100 percent of small business insurance policies can be deducted from taxes.

Utilities

In addition to rent and insurance, all utility costs for your business are tax deductible. This includes electricity, water, sewage, trash, and phone bills. For those who operate their business out of a residence, first landlines are not deductible, but any subsequent lines qualify.

Inventory

If your small business is inventory-based, either reselling, or manufacturing products, you can deduct all inventory costs from your taxes.

Machinery/Equipment Rent and Depreciation

Any expenses paid to rent machinery or equipment are fully deductible from taxes, but over a course of several years. This can include anything from construction equipment and truck fleets to copier machines, printers, furniture, and more. Depreciation may also be claimed on such equipment if you meet certain qualifications.

Software Subscriptions

Any purchased or downloaded software used for your business is tax deductible. This can include accounting software, business platform software, spyware, ransomware, malware, virus protection, analytical programs, and more.

Advertising and Marketing

Any money spent on advertising for your small business can be deducted from taxes so long as it can be proven that such marketing is related to your company. This includes internet advertising, online marketing, billboards, commercials, phone book advertisements, newspaper advertisements, logo design work, and even business cards.

Legal and Professional Expenses

If your small business requires you to spend money on legal and professional services, you can deduct these expenses from your taxes. Fees for lawyers, accountants, notaries, and more are 100% tax deductible.

Office Supplies

Any money spent on office supplies can be deducted from taxes. Everything from computers and fax machines to copier paper, pencils, staplers, binders, folders, and more qualify.

Office Furniture

Like office supplies, any money spent on furnishing your office or business can be deducted from taxes. Couches, chairs, hair washing stations, massage tables, conference tables, cubicles, lamps, and more all qualify as a small business tax deduction.

Automotive Expenses

Any money spent on vehicles used for business purposes qualify as a small business tax deduction so long as you also keep track of all of milage. Examples of work vehicles include box trucks, delivery vans, semi-trucks, company cars, and buses.

Travel Expenses

If you spend money on traveling for your small business, you can deduct these expenses from taxes. You can claim deductions for airline flights, buses, taxis, trains, trolleys, or traveling on the road in your own car. Not only can tickets be written off, but other related expenses qualify as well, such as hotel and fuel costs.

Loan Interest

Any interest paid on a small business loan is generally 100% tax deductible so long as all portions of the loan are used for business expenses.  The loan must also be through a professional organization to qualify.

Taxes

The taxes you pay to operate your small business may be tax deductible, including sales, state, local, income, federal, and real estate taxes. Additionally, the money you spend on having your taxes done each year can also qualify as a small business tax deduction.

Bad Company Debt

Opposed to personal debt, bad company debt may qualify as a small business tax deduction under certain perimeters. For instance, if you can prove that you were never paid back for a loan to an employee or vender, you may be able to claim this loss as “bad debt.” Examples include Loans to clients, suppliers, distributors, or employees, as well as customer credits or tabs, and business loan guarantees.

Contracted Labor

If your small business pays freelancers or independent contractors, you can claim these expenses and deduct them from your taxes.

Business Entertainment

If you entertain current or potential clients for your business, you can write these expenses off as a small business tax deduction. Sporting events, dinners, gifts, and more generally qualify.

Employee Benefits Programs

If your small business provides and pays for benefit programs for staff, such expenses can be claimed as a tax deduction. Examples include tuition assistance, education assistance, life insurance adoption assistance, retirement plan accounts that qualify, and dependent care assistance.

Employee Salaries

The money spent on employee’s wages qualifies as a small business tax deduction. Wages like promotions, bonuses, and commission also qualify. Not all small business can take advantage of this tax deduction, including partners, LLCs, and sole proprietors.

Employee Gifts

Buying your employees gifts gives back in terms of small business tax deductions. Up to $25 per employee each year is 100% tax deductible.

Do you have questions about your small business taxes? Contact Aspire CPA at (317) 469-4500, or email our office at acct@aspirecpas.com, and speak with a licensed Certified Public Accountant to learn how our business tax services in Indianapolis, Indiana can help grow your bottom line.

You Should Also Read:

Advisory services for the small business: A primer
Back…to the office
Fundamental Facts About Business Tax

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